Texas Claims Compliance

and expanded in the first-party context in Viles v. Security National Ins. Co. (1990) . This duty arises from the "special relationship" created by the unequal bargaining power in an insurance contract . It mandates that an insurer investigate claims thoroughly and in good faith, and deny them only when a reasonable basis exists .

), which held that if an insurer assumes the insured's defense without a reservation of rights and with knowledge of facts indicating noncoverage, all policy defenses—including those of noncoverage—are waived, effectively creating coverage through estoppel .

the Texas Supreme Court established that an insurer has a duty to accept reasonable settlement demands within policy limits to protect the insured from excess judgments . Under the Stowers doctrine, the insurer assumes control of the defense and must act as a reasonably prudent person would .

Following Ruttiger, questions remained regarding whether claimants could circumvent the elimination of the bad faith tort by pleading communication failures as fraud, negligent misrepresentation, or specific Insurance Code violations. In Hopper v. Argonaut Ins. Co., 2013 WL 5853747 (Tex. App.—Austin 2013), the Austin Court of Appeals firmly shut these secondary avenues .

a "robust and bona fide dispute" regarding coverage precludes bad faith liability . If an insurer has a reasonable basis to deny or delay a claim, it is not liable for bad faith, even if the insurer is ultimately proven wrong about the coverage .

that there is no common law duty of good faith and fair dealing in the third-party context beyond the Stowers duty to settle .

In Morales, Allstate closed the claim on May 1, 2012, and had no further communication with the plaintiff. The court reiterated the Texas Supreme Court doctrine that a cause of action alleging breach of the duty of good faith and fair dealing for denial of coverage accrues on the date the claim is denied or the file is closed .

the Texas Supreme Court addressed whether an insurer had a duty to proactively inform an additional insured that coverage was available .

an insured could not recover for statutory bad faith if there was no coverage under the policy, absent an "independent injury" caused by extreme insurer conduct .

the Court addressed an insurer's communications with policyholders regarding claim disputes. The Court explicitly stated that the insurer's "legal duty to communicate with its policyholders about the status of potential claims" is tethered to its statutory obligations under the Insurance Code .

and Provident American Ins. Co. v. Castaneda (1998), an insured could not recover for statutory bad faith if there was no coverage under the policy, absent an "independent injury" caused by extreme insurer conduct .

the Texas Supreme Court found bad faith where the insurer investigated a fire loss with a built-in bias, ignoring evidence that favored the insured to construct a "pretextual basis" for an arson denial . An insurer cannot insulate itself from liability by conducting a sham investigation .

dealing with a plumbing leak and foundation damage, the court ruled that an insurer acts in bad faith if it relies on an expert report that was not objectively prepared, or if the insurer's reliance on a known biased expert was unreasonable .

In Texas Mutual Ins. Co. v. Ruttiger, 381 S.W.3d 430 (Tex. 2012), the Texas Supreme Court officially closed the door on the ability of workers' compensation claimants to seek supplemental relief for claims handling disputes in civil court .

bad faith alone does not justify punitive damages. An insurer is liable for punitive damages only if the bad faith is accompanied by gross negligence, fraud, or malice . Gross negligence requires "conscious indifference to a known risk of serious harm" . The harm must be distinct from standard contract damages, such as the genuine likelihood of financial catastrophe or severe physical harm .

. In Ulico, the Court clarified that while an insurer's failure to send an ROR does not inherently expand the insurance contract, if the insurer assumes the insured's defense without a valid ROR and the insured is actually prejudiced by the insurer's actions, the insurer may be estopped from denying benefits .

ACCEC. Cook v. State Farm Bad Faith.

. The Court established five rules governing the relationship between contractual claims and extra-contractual (bad faith/statutory) claims :

where the Court ruled that an insured cannot recover policy benefits as actual damages caused by an insurer's statutory violation (e.g., failure to provide a reasonable explanation or status update) unless the insured proves they had a contractual right to those benefits .

. This duty arises from the "special relationship" created by the unequal bargaining power in an insurance contract . It mandates that an insurer investigate claims thoroughly and in good faith, and deny them only when a reasonable basis exists .

the appellate court held unequivocally that "there is no general fiduciary duty between an insurer and its insured" . The court noted that "subjective trust by one party in another does not establish the requisite confidential relationship" required to impose informal fiduciary duties .